Commercial Property Development Finance in 2026: What Actually Gets Funded and on What Terms

Funding a commercial scheme from a bare site through to a sold or refinanced building is a sequence of separate decisions, not one. You buy the land, you draw down against build costs in stages, you cover the gap between what a senior lender will advance and what the project actually costs, and then you repay the development loan once the building is finished but before every unit has let or sold. Each of those moments has its own product, its own pricing, and its own appetite from the market. The developers who keep schemes moving in 2026 are the ones who treat the capital stack as something to assemble deliberately rather than something to discover when the first loan offer comes back lighter than expected.

We arrange commercial property development finance for UK developers and we sit on the borrower's side of the table. We are an introducer and arranger, not a lender, and we have no balance sheet to defend, which means our job is to lay out the whole picture honestly and then go and find the terms that fit the scheme. You can read more about how we work on the commercial property development finance money site. This article is the broad overview: what the products are, how lenders size and price them at a high level, and which sectors are getting money in 2026.

The product ladder, from senior debt to full funding

There is no single thing called development finance. There is a ladder, and where you sit on it depends on how much of the cost you can fund yourself and how much risk a lender will carry.

At the base sits senior development finance, the first and cheapest layer of debt. It is secured by a first charge over the site and it funds the land alongside staged drawdowns against construction costs. On its own, senior debt indicatively covers around 65 to 70% of total project cost. That leaves a real gap for most developers, because few want to put 30 to 35% of a scheme in as cash.

To close that gap, the next rung is stretched senior, where a single lender pushes the advance up to roughly 75 to 80% of cost in one facility. Above that, mezzanine finance sits behind the senior loan as a second layer of debt, and a senior plus mezzanine structure together can reach around 85 to 90% of cost. Mezzanine is more expensive than senior because it ranks behind it and carries more risk, but it lets a developer spread their own cash across more schemes rather than sinking it all into one.

At the top of the ladder is JV equity, where a partner puts in the remaining cash the debt does not cover, in some cases taking the funding line up towards 100% of cost. Equity is the most expensive money in the stack because the partner shares in the profit rather than taking a fixed rate, but for the right scheme and the right track record it is what gets a project off the ground when a developer is short of cash but not short of opportunity.

Then there is the end of the build, which has its own product. We will come back to development exit below, because it sits at a different point in the timeline to everything above.

How lenders size it, at a high level

The single most useful thing to understand about development finance is that lenders run two tests and lend against the lower answer.

The first test is loan to cost, or LTC. This measures the loan against the total cost of delivering the scheme: land, construction, professional fees, finance costs, contingency. In 2026, senior LTC indicatively lands around 65 to 70%.

The second test is loan to gross development value, or loan to GDV. This measures the loan against what the finished building will be worth, and senior lenders indicatively cap it around 60 to 65% of GDV. GDV is the lender's safety net, because if the scheme has to be sold at completion, the loan has to clear comfortably below that value.

The facility you actually get is the lower of the two figures. On a scheme where costs are high relative to end value, loan to GDV will bite first and the LTC headline becomes irrelevant. On a scheme with a fat margin between cost and value, LTC sets the ceiling. A developer who only looks at the LTC number can be caught out badly when the GDV test lands lower, and the gap between the two is exactly where mezzanine and equity earn their keep. A separate guide covers the sizing mechanics in proper depth, so the point to hold here is simply this: two tests, lend against the lower, and build the rest of the stack to fill whatever gap is left.

The rate picture in 2026

The backdrop matters. The Bank of England base rate sits at 3.75%, held since the cut in December 2025, and that stability has taken some of the heat out of pricing conversations that were febrile a couple of years ago. Lenders are not pricing for a rising rate environment, which helps.

Against that base, senior development finance is indicatively priced at around 9 to 12% per annum, depending on the lender camp, the strength of the scheme, and the developer's experience. Shorter, bridging-style facilities are quoted monthly rather than annually and indicatively run around 0.65 to 1.0% per month. On top of the rate sits an arrangement fee, indicatively 1 to 2% of the facility, and you should expect an exit fee on many products too.

Mezzanine and equity sit above those numbers because they carry more risk, and their cost is best understood scheme by scheme rather than as a headline rate. If you want to see how the layers stack together, our development finance rates page sets out the indicative bands. Every figure here is indicative and none of it is an offer. Real pricing comes from a real lender looking at a real scheme.

Development exit at the end of a build

The development loan does its job during construction, but it is expensive money and it usually has to be repaid at or shortly after practical completion. The problem is that completion rarely lines up with sales or lettings. A building can be finished and signed off while units are still being marketed.

Development exit finance solves that. It is a bridge taken out at practical completion to repay the development loan, secured against the finished building. Because the construction risk has gone and you are now lending against a complete, valued asset, the terms are friendlier: loan to value indicatively up to 70 to 75% of completed value, over a term of around 6 to 18 months. That breathing room lets a developer sell or let at a sensible pace rather than dumping stock to hit a hard repayment date, and it often frees up cash to start the next scheme. For commercial developers it is one of the most useful and most underused products on the ladder.

Which sectors are getting funded

Appetite is not uniform across property types, and lender enthusiasm in 2026 follows the occupational story. Logistics and warehousing continue to attract money on the back of steady occupier demand. Industrial and self-storage hold firm. Purpose-built student accommodation and build to rent draw funding where the location and operator stack up. Care homes, healthcare, and life sciences are funded as the structural demand behind them holds. Data centres are a clear area of appetite where power and connectivity allow.

Offices are funded selectively, with lenders favouring quality and energy performance over secondary stock. Retail, hotels, and leisure are funded where the specific scheme and operator make the case rather than on the sector label alone. Mixed-use schemes, which combine several of these, are common and are assessed on the blend. The honest summary is that almost every commercial sector can be funded in 2026, but the terms and the appetite vary widely, and the difference between a quick yes and a slow no is usually how well the scheme is presented and which lender camp it is taken to.

Who funds it

The market is broader than most developers realise, and matching the scheme to the right camp is half the job. Specialist development lenders are the workhorses of construction funding and move quickly on schemes that fit. Challenger banks lend actively across the mid market. Senior, clearing, and insurance-backed banks offer the keenest pricing but apply the tightest criteria and the slowest process. Real estate debt funds take on the schemes and structures that banks step back from. Mezzanine providers fill the layer behind the senior loan, and JV equity partners supply the cash at the top of the stack. We stay deliberately lender-agnostic, because the right answer for one scheme is the wrong one for the next.

Talk to us

If you are weighing up a commercial scheme and want a clear read on what it can raise, what the stack should look like, and which lender camps to approach, that is exactly what we do. Bring us the costs, the end value, and your track record, and we will tell you honestly where the numbers land before you commit. You can start the conversation through the commercial property development finance site. There is no charge for an initial view and no obligation to proceed.

Listen, watch and read more

• Listen to the episode on the Commercial Property Development Finance podcast, on Spotify, Amazon Music, Pocket Casts, Player FM, Podcast Addict or Deezer, or via the RSS feed.
• Watch the 2026 market outlook on YouTube.
• Go deeper: How a development lender sizes and prices a scheme and the development finance product ladder.

All rates, fees, and loan-to-value figures in this article are indicative market bands for general guidance only and do not constitute an offer of finance or financial advice. Commercial development finance of this kind is unregulated lending, and we are not authorised by the FCA. Any facility is subject to lender underwriting, valuation, and full credit approval, and terms vary by scheme and borrower. Written by Matt Lenzie.